MANA 6333-N1 4 March 2009 Total Quality Management (TQM) vs. Six Sigma: Measuring Success in the Insurance Industry One of the most frequently asked questions among those in the organizational management world is the difference between Six Sigma and Total Quality Management (TQM).
According to BNet Business Dictionary, Six Sigma is defined as “a data-driven method for achieving near perfect quality, analysis can be focused upon any part of production or service activities, and has a strong emphasis on statistical analysis in design, manufacturing, and customer-oriented activities;” TQM as “a philosophy and style of management that gives everyone in an organization responsibility for delivering quality to the customer (http://dictionary. bnet. com). ” At first glance the definitions appear to be similar in context; in that both focus on the customer and may yield similar outcomes (i. . better quality/products, improving a process). However, the basic difference between the two is the approach. The TQM approach views quality as a conformity to internal requirements or a collections of processes, while Six Sigma focuses on improving quality by reducing the number of defects. This research paper will implore the reader to understand the differences between TQM and Six Sigma and cite examples of how each approach is used in the insurance industry. It will also demonstrate why Six Sigma is the most used by modern business managers.
Paradoxically, some managers (non-seasoned) see no real difference between Six Sigma and TQM. They believe Six Sigma employs some of the same tried-and-true tools and techniques of TQM. Both Six Sigma and TQM highlight the importance of top-down support and leadership. But there are critical differences. And these differences explain why TQM has taken the back seat in the car that is driven by Six Sigma. For example, each concept uses a cycle as a framework for the improvement of a process or system.
TQM, uses the Deming Cycle (PDSA), it consists of a logical order of repetitive steps for continuous improvement and learning. The four parts of the steps are paraphrased as follows: 1. Plan – a change or a test, aimed at improvement. In this phase, analyze what you intend to improve, looking for areas that hold opportunities for change. The first step is to choose areas that offer the most return for the effort you put in-the biggest bang for your buck. 2. Do – Carry out the change or test (preferably on a small scale). Implement the change you decided on in the plan phase. . Check or Study – the results. What was learned? What went wrong? This is a crucial step in the PDCA cycle. After you have implemented the change for a short time, you must determine how well it is working. Is it really leading to improvement in the way you had hoped? You must decide on several measures with which you can monitor the level of improvement. 4. Act – Adopt the change, abandon it, or run through the cycle again. After planning changes, implementing and then monitoring it, decide whether it is worth continuing that particular change.
If it consumed too much time, was difficult to adhere to, or even led to no improvement, consider aborting the change and planning a new one. However, if the change led to a desirable improvement or outcome, consider expanding the trial to a different area, or slightly increasing the complexity. This sends you back into the Plan phase and can be the beginning of the ramp of improvement (Watson p. 132). The PDSA cycle can be used to guide the entire improvement project, or to develop specific projects once target improvement areas have been identified. On the other hand, Six Sigma uses the DMAIC cycle. The Define-Measure-Analyze-Improve-Control is used when a project’s goal can be accomplished by improving an existing product, process, or service. (See Figure 7 following chart explanation) DDefine the goals of the improvement activity. The most important goals are obtained from customers. At the top level the goals will be the strategic objectives of the organization, such as greater customer loyalty, a higher ROI or increased market share, or greater employee satisfaction. At the operations level, a goal might be to increase the throughput of a production department.
At the project level goals might be to reduce the defect level and increase throughput for a particular process. Obtain goals from direct communication with customers, shareholders, and employees. MMeasure the existing system. Establish valid and reliable metrics to help monitor progress towards the goal(s) defined at the previous step. Begin by determining the current baseline. Use exploratory and descriptive data analysis to help you understand the data. AAnalyze the system to identify ways to eliminate the gap between the current performance of the system or process and the desired goal.
Use statistical tools to guide the analysis. IImprove the system. Be creative in finding new ways to do things better, cheaper, or faster. Use project management and other planning and management tools to implement the new approach. Use statistical methods to validate the improvement. CControl the new system. Institutionalize the improved system by modifying compensation and incentive systems, policies, procedures, MRP, budgets, operating instructions and other management systems. You may wish to utilize standardization such as ISO 9000 to assure that documentation is correct.
Use statistical tools to monitor stability of the new systems. Figure 7-Overview of DMAIC (Pyzdek, p. 238) The above chart shows us that Six Sigma helps organizations in reducing operational costs by focusing on defect reduction, cycle time reduction, and cost savings. Unlike the usual cost cutting measures that may reduce value and quality, its focus is on identifying and reducing costs that are not beneficial to the customer and are uneconomical to the system or process. In comparison of the two concepts-TQM and Six Sigma, the word ‘management’ stands out, as it differentiates the two concepts.
TQM provides general guidelines for management to follow. These guidelines are so abstract that only a small percentage of leaders are able to piece together a successful deployment strategy for TQM. Business magazines and newspapers reported widespread failure of TQM efforts. According to Juran, the most frequent reason why TQM programs fail is failure of upper management to be personally involved in their company’s efforts toward quality” (Chvala p. 12). This can be attributed to the vagueness of responsibility and managers’ effort to delegate under such circumstance.
Concrete research has shown that organizations which succeeded in successfully implementing TQM reaped substantial rewards. But the low probability of success discourages many organizations from trying TQM. Instead, many organizations opted for ISO 9000. ISO 9000 promises not world-class performance levels, but “standard” performance. But it provides clear criteria and a guarantee that meeting these criteria will result in recognition. In contrast, TQM offered a mushy set of philosophical guidelines and no way to prove that one had accomplished their quality goals.
Unlike TQM, Six Sigma was not developed by techies who only dabbled in management. Six Sigma was created by some of America’s most gifted CEOs. People like Motorola’s Bob Galvin, AlliedSignal’s Larry Bossidy, and GE’s Jack Welch. These people had a single goal in mind: to make their businesses as successful as possible. Once they were convinced that the tools and techniques of the quality profession could help them do this, they developed a framework to make it happen…Six Sigma. Speaking as a member of the quality profession, we knew that we had a winning set of tools that could solve quality problems in manufacturing.
Total quality control, invented in 1950, showed that product quality could be improved by expanding quality efforts into upstream areas such as engineering and purchasing. We even had limited success in using our tools to improve quality in administrative areas by reducing errors in service transactions. But despite these successes we suffered from a number of shortcomings. For example: •We focused on quality and ignored other critical business issues. Quality trumped everything else. Of course, this made no business sense and often lead to organizations that failed despite improved quality. We created a quality specialty that suffered from all of the same suboptimization problems as other functions within the organization. Despite all of our talk about a systems perspective, when push came to shove we fought for our point of view (and our budget) just like everyone else. In the typical organization this resulted in other departments considering “quality” to be the turf of the quality department. Thus, they backed off of-or never started-efforts of their own. •We emphasized minimum acceptance requirements and standards, rather than striving for ever increasing levels of performance. We never developed an infrastructure for freeing up resources to improve business processes. •We developed a career path in quality. Quality professionals tended to lack subject matter expertise in other areas of the company. This division of labor, combined with functionally specialized organization, made it difficult to improve quality beyond a certain level. (I estimate that this type of organization tops out at about 3. 5 sigma. ) The CEOs were able to see what the problems were, and to create an approach that fixed them. Six Sigma addresses all of these issues. Six Sigma extends the use of the improvement tools to cost, cycle time, and other business issues. •Six Sigma discards the majority of the quality toolkit. It keeps a subset of tools that range from the basic to the advanced. Six Sigma discards esoteric statistical tools and completely ignores such staples of the quality professional as ISO 9000 and the Malcolm Baldrige criteria. Training focuses on using the tools to achieve tangible business results, not on theory. •Six Sigma integrates the goals of the organization as a whole into the improvement effort.
Sure, quality is good. But not independent of other business goals. Six Sigma creates top-level oversight to assure that the interests of the entire organization are considered. •Six Sigma strives for world-class performance. The Six Sigma standard is 3. 4 PPM failures per million opportunities. It goes beyond looking at errors. The best of the Six Sigma firms try to meet or exceed their customer’s expectations 999,996. 6 times out of every million encounters. •Six Sigma creates an infrastructure of change agents who are not employed in the quality department.
These people work full and part-time on projects in their areas or in other areas. Six Sigma Black Belts do not make careers in Six Sigma. Instead, they focus on Six Sigma for two years and then continue their careers elsewhere. Green Belts work on Six Sigma projects while holding down other jobs. These subject matter experts are provided with training to give the skills they need to improve processes. Six Sigma “belts” are not certified unless they can demonstrate that they have effectively used the approach to benefit customers, shareholders, and employees.
There are many other differences as well. Having worked with organizations that have done TQM well and Six Sigma well, I can tell you that successful programs of both types look very much alike. But Six Sigma, by clearly defining this “look,” makes it easier for organizations to succeed by providing a clear roadmap to success. Don’t get me wrong; I’m not saying that succeeding at Six Sigma is easy! But organizations are more willing to invest the effort if they know that a pot of gold awaits them at the end. The first answer to what is six sigma is that it is a management philosophy.
Six sigma is a customer based approach realizing that defects are expensive. Fewer defects mean lower costs and improved customer loyalty. The lowest cost, high value producer is the most competitive provider of goods and services. Six sigma is a way to achieve strategic business results. Another answer to what is six sigma is six sigma is a statistic. Six sigma processes will produce less than 3. 4 defects or mistakes per million opportunities. Many successful six sigma projects do not achieve a 3. 4 ppm or less defect rate.
That just indicates that there is still opportunity. A third answer to what is six sigma is that six sigma is a process. To implement the six sigma management philosophy and achieve the six sigma level of 3. 4 defects per million opportunities or less there is a process that is used. The six sigma process is define, measure, analyze, improve and control DMAIC. When answering the question what is six sigma understand that six sigma is not a set of new or unknown tools. Six sigma tools and techniques all are found in total quality management.
Six sigma is the application of the tools on selected important projects at the appropriate time. Six Sigma is a relatively new concept as compared to Total Quality Management (TQM). However, when it was conceptualized, it was not intended to be a replacement for TQM. Both Six Sigma and TQM have many similarities and are compatible in varied business environments, including manufacturing and service industries. While TQM has helped many companies in improving the quality of manufactured goods or services rendered, Six Sigma has the potential of delivering even sharper results.
Total Quality Management Total Quality Management is often associated with the development, deployment, and maintenance of organizational systems that are required for various business processes. It is based on a strategic approach that focuses on maintaining existing quality standards as well as making incremental quality improvements. It can also be described as a cultural initiative as the focus is on establishing a culture of collaboration among various functional departments within an organization for improving overall quality.
Comparison To Six Sigma In comparison, Six Sigma is more than just a process improvement program as it is based on concepts that focus on continuous quality improvements for achieving near perfection by restricting the number of possible defects to less than 3. 4 defects per million. It is complementary to Statistical Process Control (SPC), which uses statistical methods for monitoring and controlling business processes. Although both SPC and TQM help in improving quality, they often reach a stage after which no further quality improvements can be made.
Six Sigma, on the other hand, is different as it focuses on taking quality improvement processes to the next level. The basic difference between Six Sigma and TQM is the approach. While TQM views quality as conformance to internal requirements, Six Sigma focuses on improving quality by reducing the number of defects. The end result may be the same in both the concepts (i. e. producing better quality products). Six Sigma helps organizations in reducing operational costs by focusing on defect reduction, cycle time reduction, and cost savings.
It is different from conventional cost cutting measures that may reduce value and quality. It focuses on identifying and eliminating costs that provide no value to customers such as costs incurred due to waste. TQM initiatives focus on improving individual operations within unrelated business processes whereas Six Sigma programs focus on improving all the operations within a single business process. Six Sigma projects require the skills of professionals that are certified as ‘black belts’ whereas TQM initiatives are usually a part-time activity that can be managed by non-dedicated managers.
Applications Where Six Sigma Is Better Six Sigma initiatives are based on a preplanned project charter that outlines the scale of a project, financial targets, anticipated benefits and milestones. In comparison, organizations that have implemented TQM, work without fully knowing what the financial gains might be. Six Sigma is based on DMAIC (Define-Measure-Analyze-Improve-Control) that helps in making precise measurements, identifying exact problems, and providing solutions that can be measured. Conclusion
Six sigma is also different from TQM in that it is fact based and data driven, result oriented, providing quantifiable and measurable bottom-line results, linked to strategy and related to customer requirements. It is applicable to all common business processes such as administration, sales, marketing and R & D. Although many tools and techniques used in Six Sigma may appear similar to TQM, they are often distinct as in Six Sigma, the focus is on the strategic and systematic application of the tools on targeted projects at the appropriate time.
It is predicted that Six Sigma will outlast TQM as it has the potential of achieving more than TQM. Tony Jacowski is a quality analyst for The MBA Journal. Aveta Solution’s Six Sigma Online ( http://www. sixsigmaonline. org ) offers online six sigma training and certification classes for lean six sigma, black belts, green belts, and yellow belts. Works Cited BNET. “Business Definitions for Total Quality Management. ” 2009 CBS Interactive Inc. . Watson, Mary. The Deming Management Method. Penguin Group (USA) Incorporated. January 1988. Pyzdek,Thomas.
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